TSMC Will Not Ship To Huawei This Quarter, Expects 70% Density Gain From N3 Node

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The Taiwan Semiconductor Manufacturing Company, Ltd (TSMC) released its earnings report for the third quarter of 2020 earlier today in Taiwan. In the report, the company beat its own guidance for the quarter and grew its revenue by 29% year-over-year and 17% sequentially. The quarter was an important one for TSMC (NYSE:TSM) as it had to stop making shipments to China's Huawei Technologies, Ltd following sanctions by the United States Department of Commerce.

At the investor call to discuss the earnings report, TSMC's management revealed key details for its current and future products and the current political situation that the company is facing. The comments ranged from TSMC's expectations from its N3 performance node, it's future dealings with Huawei and its plans to build a chip fabrication facility in Arizona.

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TSMC Will Not Ship Products To Huawei This Quarter, Build A Fab In Arizona If Conditions Permit & Achieve 70% Density Improvements With N3

Right now, TSMC's 5nm processors are making their way inside Apple's iPhones 12. These processors are manufactured on what the company dubs as its N5 process node. This is a generational jump over the N7 node, through different design and manufacturing rules. Following the N5, TSMC will shift to N4 and then to N3 - after which, the future is uncertain as during today's conference the company's management refused to comment on its 2nm process plans and dubbed all reports for the node floating around in the press as unofficial.

According to TSMC, the N4 node will enter risk production in the fourth quarter of this year and enter volume production in 2022. More importantly, the company once again provided details for its N3 process, which will be TSMC's final design improvement of the N5. They show that N3 will improve transistor density by 70%, performance by 50% and power efficiency by 30%.

Slide 4 from TSMC's presentation for the third quarter of 2020 reveals that 7nm products contributed 35% to the company's revenue and revenues from the advanced 5nm node stood at 8%. Slide 5 reveals that smartphone products accounted for 46% of the company's revenues, with high-performance computing (HPC) coming in at second place with a 37% share. Image: TSMC 2020 Third Quarter Earnings Conference Presentation Material

N3 will enter risk production next year and volume production is targetted for the second half of 2022 stated TSMC. It will continue to use FinFET transistors, and might potentially be the company's last FinFET application if rumors of it migrating to GAAFET (Gate All Around) transistors for the 2nm process hold their ground.

In response to a question from Citigroup, TSMC's chief executive officer Dr. C.C. Wei outlined the company's position on its relationship with Huawei. When asked about a hypothetical timeline for securing American approval for supplying the Chinese company with semiconductors and whether TSMC's revenue guideline of $12.4 billion - $12.7 billion for the current quarter includes products sold to Huawei, Dr. Wei replied:

“We comply fully with the regulation. We also noticed there are reports saying that TSMC got the license. We are not going to comment on this unfounded speculation. And we are also don’t want to comment on our status right now. For the 4Q shipment to Huawei, no, the ban, the regulation already said that [shipments are allowed] up to September 17th…September 15th”

Finally, the company's chief financial officer Mr. Wendell Huang also commented on its plans for building a chip fabrication facility inside the United States. TSMC announced the plant in June 2020, and as reported by Sina Finance, Mr. Wendell his company is ready to construct the facility if conditions allow it to do so. The report does not mention which conditions TSMC is monitoring, but more details should become clearer in the future.